Tabcorp Holdings (TAH)

Deutsche Bank has upgraded its rating on
Tabcorp
from “sell" to “hold", with a price target of $2.75, due to share price underperformance in the past three months.

Despite the stock trading at a discount to the broker’s valuation, Deutsche Bank notes that Tabcorp has relatively high gearing levels, that its dividend payout ratio will be reduced to 50 per cent in fiscal 2012, and that it still needs to resolve the Victorian Wagering licence details with the Victorian racing industry, NSW Wagering exclusivity by 2013, and the TVN agreement by the end of 2012.

The broker also believes that wagering uncertainty has returned due to the recent Federal Court judgment in the Betbox case, which Deutsche Bank says “lays the foundation for the inevitable challenge to the retail exclusivity of the tote operators".

Recent statements and actions of the ACCC, combined with ongoing litigation uncertainty, make potential corporate activity even less likely in the near term, says the broker, which expects Crown to unwind its 4.9 per cent economic interest in the company.